In 2017, improving global economic conditions, especially in the US and
Europe, supported growth in throughput volumes around the world.
However, excess capacity in the container shipping industry continued
to keep freight rates under pressure, necessitating cost cutting measures
and restructuring amongst shipping lines, mainly in the reformation of
alliances and mergers and acquisitions.

CO-MANAGEMENT IN HONG KONG ENHANCES OPERATIONAL EFFICIENCY

Starting 1 January 2017, HPH Trust's Hong Kong ports rolled out the co-management
arrangement of the five container terminals in Kwai Tsing,
streamlining operations and delivering additional operational efficiency.
Pursuant to the arrangement, one management team will be responsible
for managing and operating the terminals at HIT, COSCO-HIT and ACT.
Revenue and expenses from these terminals will be allocated among the
parties according to the respective designed capacity of the facilities.

In order to facilitate a more meaningful comparison of the percentage
variances on certain key operating results post co-management in
2017 against the pre co-management results of 2016, certain 2016 key
operating profit and loss lines have been internally re-stated to include
100% of the these terminals to derive a restated percentage variance. For
the purposes of the Financial Review, all key operating results percentage
variances mentioned will be in reference to the restated percentage
variances as shown in the table below:

While HPH Trust's ports benefitted from the pickup in global economic
activity, average revenue per TEU was below that of 2016 mainly due
to the greater volume of concessions offered to certain shipping lines
and revisions on tariffs following the mergers and acquisitions amongst
existing customers.

In 2017, HPH Trust recorded a 7.9% growth in throughput to 24.3 million
TEU. Supported by the growth of outbound cargoes to the US and
Europe, as well as empty and transshipment cargoes, YANTIAN's
throughput rose 8.6% to 12.7 million TEU. At the same time, our
terminals at Kwai Tsing in Hong Kong handled a combined container
throughput of 11.4 million TEU, an increase of 5.1% due largely to higher
transshipment cargoes and additional throughput from a new customer.

HPH Trust's revenue and other income came in at HK$11,551.0 million
in 2017, 1% higher than last year. However, cost of services rendered was
HK$4,131.6 million, 4% higher than last year mainly attributed to higher
throughput handled and general cost inflations, including rises in external
contractors' costs. This increase, however, was partially offset by the
cost-synergies arising from the improved efficiency in resource allocation
from the co-management arrangement. As a result, operating profit was
down by 4%.

NPAT in 2017 was HK$2,217.5 million, a 15%2 drop from 2016. NPAT
attributable to unitholders was HK$944.2 million, down 30%2 from 2016
reflecting both lower operating profit, the higher general interest rates
and the effective share of HICT losses while it ramped up its operations
following its acquisition by YANTIAN at the end of 2016.

It is HPH Trust's ongoing strategy to optimise its financing and capital
structure. At the end of December 2017, total borrowings declined to
HK$32,699.5 million, down from HK$33,641.6 million a year ago, in line
with our strategy to reduce overall indebtedness.

The balance sheet of HPH Trust remained sound with a cash balance
of HK$6,768.1 million and net debt of HK$25,931.4 million at the end of
December 2017. The decline in 2017 cash balance is largely attributed
to the cash consideration of HK$672.8 million paid in 2017 for the
acquisition of 41.3% effective interest in HICT in December 2016 which
were partially offset by the reduction in capital expenditure mainly
resulting from the near completion of the West Port Phase II project in
YANTIAN at the end of 2017.

HPH Trust has recommended a total payout of HK$1,794.5 million for 2017,
which translates to a DPU of 20.6 HK cents. Based on the US$0.415 market
price as at 29 December 2017, the distribution yield approximates 6.4%.

Supported by our proactive capital management efforts and sound
balance sheet, the Trust is in a good position to continue building a long
term sustainable business.

OUTLOOK FOR 2018

Although the momentum over the improvement in world economic
activity as seen last year is expected to continue into 2018 but this, by and
large, is still susceptible to the uncertainties and downside risks arising
from geopolitical tensions and regulatory reforms which may impact on
the overall rate of growth. Furthermore, major liners have announced
plans to continue to invest and build more mega-vessels of up to 22,000
TEU and 2018 is set to see some of these new mega-vessels being put
into operations. This potential excess capacity will likely put pressure on
freight rates, and as a result, keep port tariffs in check.

Against this backdrop, the Trust remains vigilant but confident that
our pro-active efforts to make the most of our modern facilities and
equipment, skilled manpower resources, strategic locations and efficient
mega-vessel handling capabilities can enable us to advance in this new
era for the liner shipping industry.

1Net other operating expenses are defined, for the purposes of this table, as staff costs, depreciation and amortisation, other operating income and other operating expenses, excluding the
one-off government rent and rates refund of HK$430 million received in 2016.2In the first quarter of 2016, HPH Trust received government rent and rates refund of HK$430 million. This one-off refund has been excluded from the operating profit and NPAT
calculations for comparative purposes.